I think it's early to looking at Euro financials. RBS is on the brink of disaster, and Europe needs to do something more than guarantee bank deposits to create any confidence. They haven't even entered the first inning of the cleanup phase.
OTOH, most of the systemic problems in the US have been fairly well addressed. WB is still up in the air, and there are still some bad earnings to get through this month. Fortuntely, the US has set up most of the backstops to prevent a free fall. Hopefully, we can just grit our teeth and get through the fourth quarter without any more disasters.
Yes, Europe hasn't clearly labeled the winners and losers at this point, so there is still confusion where I see BCS and ING constantly called survivors and winners, but their names get grouped in by sector association when the bad news and worries come out too.
We won't see much buying in the potential winners until the divergence is clear.
CME is starting a clearing exchange for CDS products. That might start to put level out some of the volatility behind the insane CDS spikes. Personally, I think the whole CDS market is an outright scam since no one really has the capital to absorb the losses.
IMO, the biggest sense of urgency behind FED cuts is to prevent more foreclosures as Libor rates have surged over the past month. It's kind of amazing the FED is dragging their feet to deliver another rate cut.
Agree on the CDS market, it never should have been allowed to grow by the regulators.
As for foreclosures, TARP will start buying stuff next week. One key component will be that mortgages bought by TARP can immediately be turned over to FHA for refinancing. That would reduce foreclosures by several hundred thousand in the next few months from what I read.
A coordinated worldwide rate cut also seems inevitable.
A Fed rate cut before credit markets thaw out not only will do nothing to help, but may in fact make the situation worse, because it will be seen as grasping at straws. The US already has by far the lowest Fed funds rate, with the exception of Japan.